2006-01-AU Audit of the County of Hawai‘i's Recycling and Diversion Grants Program

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Chapter 3 ADF — GLASS CONTAINER RECOVERY PROGRAM Because BSH does not weigh all incoming ADF glass, it utilizes the following method to calculate processed weights billed to the County: Weight scale receipts for end market deliveries, including all crushed HI5 glass and ADF glass, is reduced by the sum of all weight scale tickets for incoming H15 glass from the ARC of Hilo (ARC), with the remaining weight being considered as ADF glass. If sufficient controls were in place, this should be an acceptable method of calculation. However, the County of Hawaii, Legislative Auditor's Limited Scope Performance Review — Glass Recycling and Diversion Program dated December 24, 1998, raised concerns specifically relating to "stockpiling of processed glass and the possibility of reusing stockpiled glass for purposes of reimbursement" by then contractor Recycle Services Hawaii (RSH), whose principal owner is now principal owner of BSH. This concern, combined with records indicating that BSH's 2004 and 2005 claims include deliveries to an end -user who is also a BSH officer, do not provide reasonable assurance that processed glass is claimed only once for payment under the ADF program. The County's current requirement for photographs of processed glass deposited at an end -user site does not constitute an adequate control, since the possibility of stockpiled materials being reloaded and reweighed for purposes of reimbursement as cited in the 1998 audit report remains unresolved, and additional control measures should be implemented. DEM program files also included BSH spreadsheets recapping ADF tonnage collected, processed, and sold for the second half of fiscal year 2004 -2005, indicating 1,108,360 pounds of HI5 redemption glass sold during May and June 2005. However, BSH's involvement with H15 redemption glass is limited to its role as subcontractor to ARC. According to DOH Environmental Health Specialist Peter Bloom, BSH is prohibited from filing claims for DOH reimbursement under the HI5 program since BSH facilities are not "certified redemption centers ". Therefore, BSH has two options relating to HI5 glass containers: 1) it can separate containers and redeem them at a "certified redemption center" receiving five cents per container, or 2) it can process containers with other ADF glass at eight cents per pound under its County contract. Mr. Bloom advised that BSH stated it does the latter due to labor costs to separate containers and danger to workers of broken glass during the separation process. BSH's claims for the period January to June 2005 indicate total glass pulverized and delivered to end market users of 2,185,860 pounds, reduced by 184,000 pounds of ADF glass collected from the Kealakehe Transfer Station and exempted from the ADF program, further reduced by 1,660,660 pounds in HI5 redemption glass collections for ARC, leaving a total of 341,200 pounds claimed for payment under the ADF program. ADF documentation shows that all 2,185,860 pounds were delivered to end market users between January and June of 2005. However, in response to auditors' request for confirmation of end market use, ARC provided reports in March 2006 indicating that BSH collected 1,849,800 pounds of H15 redemption glass from ARC during the period January to June 2005, but did not sell or deliver glass to end market users until the period September to December of 2005. DEM program files also contained no documentation of BSH compliance with the buy -back incentive or public education program requirements in its ADF contracts, except for contractor notations on Diversion Program Claim Forms attesting that incentives had been paid and public program requirements were met. . Program Continuation Concerns 33